You have said:
This was written in .net 2.0 and
running at .net 3.5.
I assume that what you mean by this is that the site was originally written using ASP .Net 2.0 but that it was upgraded at some point to ASP .Net 3.5. If this is the case then it could be that you have an incorrect reference to version 1 of System.Web.Extensions. This can be remedied by follwoing the steps bellow:
1) In web.config add a reference to System.Web.Extensions v3.5:
<assemblies>
<add assembly="System.Web.Extensions, Version=3.5.0.0, Culture=neutral, PublicKeyToken=31BF3856AD364E35"/>
</assemblies>
2) In web.config add the following as a child of configuration:
<configuration>
<!--Some other config-->
<assemblyBinding xmlns="urn:schemas-microsoft-com:asm.v1">
<dependentAssembly>
<assemblyIdentity name="System.Web.Extensions" publicKeyToken="31bf3856ad364e35"/>
<bindingRedirect oldVersion="1.0.0.0-1.1.0.0" newVersion="3.5.0.0"/>
</dependentAssembly>
</assemblyBinding>
</configuration>
As brenden mentions you may also need the correct version of the Ajax Toolkit.